Questions Remain on BEPS, U.S. Model Treaty Changes

With both the OECD’s report on base erosion and profit shifting project (BEPS) and the U.S. Treasury Department public comments on model treaty changes due in September, questions remain as to whether taxpayers will be required to deal with multiple regulations or if they will be similar and streamlined.

The U.S. Treasury Department released five proposed treaty changes in May, from preventing tax avoidance through special tax regimes and changes in law enacted after a treaty takes effect to denying treaty benefits to certain types of multi-country transactions involving permanent establishments.

In addition, for the first time the U.S. Model recognizes that multinationals may have global operations in many locations, therefore it has included a taxpayer-favorable rule as an additional method of qualifying for treaty benefits based on a broader concept of ownership that includes certain third-country ownership.